Weak Income Growth and Rising Rents Create Severe Affordability Problems for American Renters

Monday, December 9, 2013

Cambridge, MA and Washington, DC –Affordability problems for renters have skyrocketed over the past decade both in number and the share of renters facing them, according to a new report on rental housing from the Harvard Joint Center for Housing Studies. The inability of so many to find housing they can afford dramatically impacts the health and well-being of U.S. renters, as lower-income households cut back on food, healthcare, and savings, just to keep up.

Released today at an event held at the Newseum in Washington, DC, the report, America’s Rental Housing: Evolving Markets and Needs, finds that half of U.S. renters pay more than 30 percent or more of their income on rent, up an astonishing 12 percentage points from a decade earlier. Much of the increase was among renters facing severe burdens (paying more than half their income on rent), boosting their share to 27 percent. These levels were unimaginable just a decade ago, when the share of American renters paying half their income on housing, at 19 percent, was already a cause for serious concern.

Escalating rental affordability problems come at a time when the share of Americans that rent has increased from 31 percent in 2004 to 35 percent in 2012. In fact, the 2000s marked the strongest numerical growth in renter households in the last fifty years. As ownership rates fell, housing markets have adjusted dynamically to the increased demand for single-family rentals, with about 3 million existing homes switching from owner to rental occupancy from 2007-2011 alone.

On the strength of the surge in rental demand, rental vacancies have fallen, rents have climbed, and construction of new rental housing has picked up sharply, giving an important spur to the struggling residential construction market. Rising rents combined with softness in wages has put the squeeze on affordability. The report points out that between 2000 and 2012 real median rents (adjusted for inflation) nationally increased by 6 percent, while over the same period the real median income of renters dropped by 13 percent. More than ever before, the private market struggles to provide decent housing that is affordable for people of even modest means.

The Effect of Housing Affordability On Families

“The gravity of the situation for the large proportion of renters spending so much of their incomes on housing is plain,” said Eric Belsky, Managing Director of the Joint Center for Housing Studies at Harvard, which publishes its report on the state of rental housing in the U.S. every other year. “We are losing ground rapidly against a chronic problem that forces households to cut essential spending. With little else to cut in their already tight budgets, America’s lowest-income renters with severe cost burdens spend about $130 less on food each month, and make similar reductions in healthcare, clothing, and savings. And while many choose longer commutes to lower their housing costs, the combined cost of housing and transportation means even less remains for other expenses.”

Growth in the Gap Between the Number of Low-Income Renters and the Supply of Affordable Units

“For many low-income families, the rental housing affordability crisis is like a game of musical chairs in which there is never a chair left for them,” said Chris Herbert, Research Director at the Harvard Joint Center for Housing Studies. “The shortfall in the number of units affordable to extremely low-income renters in the U.S. (those earning no more than 30 percent of the area median) more than doubled from 1.9 million in 2001 to 4.9 million in 2011. The situation just keeps getting worse. Assistance efforts have failed to keep pace with escalating need, undermining the nation’s longstanding goal of ensuring decent and affordable housing for all.”

Trends In Housing And A Discussion of Housing Policy

“The release of the Harvard Joint Center for Housing Studies rental housing report is a further indicator that serious discussion about market trends and implications for U.S. housing policy can no longer be deferred. The profound and growing needs of the expanding rental housing population should be considered a front-burner issue,” said Julia Stasch, Vice President, U.S. Programs, the John D. and Catherine T. MacArthur Foundation. The MacArthur Foundation provided principal support for the report as part of its $150 million Window of Opportunity, Preserving Affordable Rental Housing initiative.

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